December 13, 2015
On December 13th, Mr. Mikio Hataeda, Chief Representative of Bangladesh Office, Japan International Cooperation Agency (JICA), and Mr. Mohammad Mejbahuddin, Senior Secretary, Economic Relations Division, Ministry of Finance of the Government of Bangladesh, signed loan agreements for six projects under the 36th Official Development Assistance (ODA) Loan Package in Dhaka to provide up to 133,265 billion yen (approximately USD 1,111 million) in total, in presence of H.E. Mr. Masato Watanabe, Ambassador Extraordinary and Plenipotentiary, Embassy of Japan.
Having approximately 160 million people, the eighth largest population in the world, Bangladesh has maintained an annual economic growth of six percent on average over the decade through development of, among others, the ready-made garment industry and remittances. With a large labor force and a large-scale market, Bangladesh has drawn attention from foreign countries, including Japan, as an emerging nation that could serve as a promising production base or investment destination. However, infrastructure development required to provide, especially, stable power supply and transportation has not kept pace with the rapid economic growth and urbanization. Therefore, accelerating the building of infrastructure and the improvement of investment climate are priorities for encouraging further economic growth. Other important challenges include economic disparities, which are expanding between urban and rural areas due to unequal access to social and government services, and the increasing damage caused by disasters in urban areas where buildings are vulnerable to natural disasters such as earthquakes. The six projects covered by these agreements will provide assistance to address these issues toward further economic growth and to overcome social vulnerabilities in Bangladesh.
Project list of 36th ODA Loan Package
|Project Name||Executing Agency||Amount (million JPY)||Amount (million USD)||Interest (%)||Repayment Period (Year)|
|Foreign Direct Investment Promotion Project||Bank and Financial Institutions Division, Ministry of Finance
Finance Division, Ministry of Finance
Prime Minister’s Office
|15,825||132||0.01%||40 Years with 10 Years Grace Period|
|Dhaka-Chittagong Main Power Grid Strengthening Project||Power Grid Company of Bangladesh Limited||43,769||365|
|Western Bangladesh Bridge Improvement Project||Roads and Highways Department under the Ministry of Road Transport and Bridges||29,340||245|
|Maternal, Neonatal and Child Health (MNCH) and Health System Improvement Project||Ministry of Health and Family Welfare||17,520||146|
|Upazila Governance and Development Project||Local Government Division under the Ministry of Local Government, Rural Development & Cooperatives||14,725||123|
|Urban Building Safety Project||Bank and Financial Institutions Division under the Ministry of Finance
Public Works Department under the Ministry of Housing and Public Works
* 1 USD = 120 JPY
(1) Encouraging industrial diversification and promoting economic growth by improving investment climate in Bangladesh
In recent years, Bangladesh has achieved more than 6 percent of annual economic growth for more than 10 years, and a main driver of the growth is the garment industry, which consists of 80 percent of the country's exports. However, against a backdrop of fierce global competition and a lack of competitiveness in the industrial sectors, it will be more and more difficult for Bangladesh to achieve economic growth in a sustainable manner.
To overcome such obstacles, it is important for Bangladesh to promote foreign direct investment (FDI). FDI would help Bangladesh introduce new technology from overseas, nurture high value-added export-oriented enterprises and diversify its industries. However, issues that impede business operations in Bangladesh, such as limited access to financing, inadequate basic infrastructure, show that there is room for improvements in the investment climate considering the potential of the country.
To respond to this situation, the Foreign Direct Investment Promotion Project will help Bangladesh improve investment climate to promote foreign direct investment through such programs as two-step loans (refinancing scheme), project sector loans for offsite infrastructure development and equity-back finance for Economic Zone Development. Through this project, Bangladesh will facilitate the development of large-scale infrastructure including economic zones (EZs), under the framework of public private partnership, while trying to eliminate and improve cumbersome procedures, policies, or practices related to business environment of Bangladesh.
(2) A stable supply of power to the Dhaka Metropolitan Area – strengthening the Dhaka-Chittagong main power grid
The electrification rate in Bangladesh overall is low, a mere 62 percent (2013), and while the potential power demand is rising with the high growth of recent years, the power supply capacity remains at only about 80 percent, leading to regular planned power outages. The power demand is expected to increase at an annual rate of 8.5 percent, and as the power supply cannot meet that rise with only domestic natural gas, which is used for about 70 percent of the power currently used for power production, there is a need to diversify the power production fuels in use to strengthen the power supply capacity. To increase the amount of coal available for power generation and address this situation, the Government of Bangladesh is carrying out the Matarbari Ultra Super Critical Coal-Fired Power Project (I) (L/A signed in fiscal year 2014), under which a deep-sea harbor for coal ships is being constructed in Chittagong Division and a power plant is planned for construction that will generate power with that imported coal. The Dhaka-Chittagong Main Power Grid Strengthening Project that is in this agreement will lay high-voltage main power lines and construct transformer facilities so that power generated at the newly constructed power plant can be transmitted to Dhaka, providing a stable supply of power to the Dhaka Metropolitan Area which accounts for about half of the country's power demand, and contributing to economic development in Bangladesh.
(3) Bridge replacement and construction in Western Bangladesh – making the regional transportation network safer and more efficient
With robust economic development in recent years, the volume of cargo handled in Bangladesh has increased approximately eight times over the past three decades and the number of passengers traveling has increased about 6.5 times, and growth is expected to continue at a rate of approximately six percent going forward. Trucks and other road transportation account for approximately 80 percent of the transportation used domestically, and such ground transportation is vital for other countries in the region as well. About 40 percent of the some 3,800 bridges on roadways around the country have deteriorated, lack proper maintenance, or have had an initial failure, and those structural defects and damage are serious enough to make the bridges impassable. Damaged bridges that cannot be crossed during the rainy season and bridges that are dangerous for large and heavy transportation vehicles are impediments to the transportation of goods. The Western Bangladesh Bridge Improvement Project will replace and construct around 60 bridges mainly in Western Bangladesh, improving the safety when crossing rivers and the efficiency of the road network, thereby promoting socioeconomic development in the area.
(4) Supporting health service improvement from the community level to higher-level health service facilities – improving maternal and child health, and strengthening early diagnosis system of lifestyle diseases
In the area of maternal and child health in Bangladesh, the maternal mortality rate and the under-five mortality rate have been steadily declining , as a result of the decades of efforts that have been implemented. However, the health system must be further strengthened in order to address the remaining challenges such as chronic shortage of quality human resources for health, and equal services deliveries to all citizens. Japan will support an improvement of educational environment of nurses as they play critical roles in the clinical service deliveries.
Furthermore, as Bangladesh experiences a rapid increase of life style diseases such as heart disease, cancer and diabetes, strengthening early diagnosis and treatment is addressed through this support. The Maternal, Neonatal and Child Health (MNCH) and Health System Improvement Project will increase access to health services by the poor and the socially vulnerable, in particular, improvement in public health services toward universal health coverage which is our common and long term vision.
(5) Strengthening safety in public and private urban buildings – building disaster-resilient cities with the first truly earthquake-proof technologies
Dhaka and Chittagong are the two largest cities in the country, accounting for approximately 50 percent of the gross domestic product and approximately 15 percent of the population. Some 500,000 houses are concentrated in these two cities, and about 70 percent of those houses are believed to not comply with Bangladesh National Building Code (BNBC). Over the past 150 years, seven earthquakes with a magnitude of at least seven (M.7) have occurred in Bangladesh, and the next time an earthquake occurs on such a scale, it is predicted that 30 percent of the buildings in Dhaka and 80 percent of those in Chittagong will be all or partially destroyed, making those cities among the most vulnerable urban areas to disasters in the world. A related problem is human-made disasters caused by illegal construction, exemplified by the disaster in 2013 when a tenant building housing a garment factory called Rana Plaza collapsed under its own weight, killing 1,135 people. The Urban Building Safety Project will construct a Fire Service and Civil Defense Headquarters and retrofit fire stations that save lives during earthquakes and other disasters, and provide mid- to long-term low-interest financing through financial institutions with the objective of strengthening the safety of private buildings, thereby encouraging earthquake-resistant private buildings. By improving the safety of public and private buildings in these cities and reducing the risk of disaster, this project will contribute to overcoming social vulnerabilities and to reliable economic development.
(6) Improving public services – toward better rural infrastructure and strengthening administrative capacity
While Bangladesh has achieved rapid economic growth in recent years, approximately 32 percent of the population still lives below the poverty line, and the rate is especially high in rural areas, 35 percent, which is 10 percent higher than urban areas. Local government institutions in rural areas are not necessarily being able to deliver effective public services based on regional characteristics and resident demands due to a lack of development budgets and staff capacity, and also due to the lack of a system that effectively reflects and coordinates resident demands. Therefore, to improve the delivery of public services and development project implementation, strengthening local government institutions is a priority in rural areas where the poverty rate is high. The Upazila Governance and Development Project will formulate the development plans of upazila (sub district) and implement development works (rural roads, water supply, education, medical facilities, and the like), better reflecting resident demands. In addition, the project will provide training for capacity development and technical support to public servants, thereby contributing to an improvement in the lives of residents and reinforcing the local government structure of Bangladesh.